Departmental Quarterly Financial Report (April - June 2019)

April - June 2019

I. Statement outlining results, risks and significant changes in operations, personnel and program for the quarter ended June 30, 2019

1. Introduction

This quarterly report has been prepared by management as required by section 65.1 of the Financial Administration Act and in the form and manner prescribed by the Treasury Board. This quarterly report should be read in conjunction with the Main Estimates as well as Budget 2018 and Budget 2019.

A summary description of Veterans Affairs Canada’s (VAC) program activities can be found in Part II of the Main Estimates.

Basis of Presentation

This quarterly report has been prepared using an expenditure basis of accounting. The accompanying Statement of Authorities includes VAC’s spending authorities granted by Parliament and those used by the Department, consistent with the Main Estimates for the 2019-20 fiscal year. This quarterly report has been prepared using a special purpose financial reporting framework designed to meet financial information needs with respect to the use of spending authorities.

The authority of Parliament is required before monies can be spent by the Government. Approvals are given in the form of annually approved limits through appropriation acts or through legislation in the form of statutory spending authority for specific purposes.

When Parliament is dissolved for the purposes of a general election, section 30 of the Financial Administration Act authorizes the Governor General, under certain conditions, to issue a special warrant authorizing the Government to withdraw funds from the Consolidated Revenue Fund. A special warrant is deemed to be an appropriation for the fiscal year in which it is issued.

The Department uses the full accrual method of accounting to prepare and present its annual departmental financial statements that are part of the departmental results reporting process. However, the spending authorities voted by Parliament remain on an expenditure basis.

The quarterly report has not been subject to an external audit but has been reviewed by the Departmental Audit Committee.

2. Highlights of Fiscal Quarter and Fiscal Year to-Date (YTD) Results

Statement of Authorities

Overall, VAC's authorities reflect the changing demographic profile and changing needs of the men, women, and families the Department serves. This is evidenced by an increase in the number of modern-day Veterans and survivors (forecast to increase from 112,977 as of March 31, 2019, to 118,700 as of March 31, 2020) and a decrease in the number of War Service Veterans and survivors (forecast to decrease from 58,828 as of March 31, 2019, to 52,800 as of March 31, 2020). Despite the slight decrease in overall Veterans and recipients of VAC benefits, recent program enhancements have increased the demand on Veterans Well-being Act programs and benefits.

As at June 30, 2019, total authorities available (i.e. budget) for the year have decreased slightly by $6.4M (0.1%) compared to the same quarter of the previous year, from $4,395M to $4,388M (includes $44M in Budget 2019 measures approved by Treasury Board)*. This decrease is the result of a $114M decrease in Vote 5, Grants and Contributions, which is offset by a $101M increase in Vote 1 Operating Expenditures, and a $6.6M increase in total Statutory authorities.

Total authorities used (i.e. expenditures) during the first quarter of 2019-20 are $63M (5.6%) less when compared to the same three-month period of 2018-19, from $1,123M to $1,060M. A break-down in the spending for the first quarter of 2019-20 indicates that Grant and Contribution spending (Vote 5) decreased by $77M, primarily due to the transition to the Pension for Life suite of programs and changes to the way payments are issued. As a result of offering monthly benefits through Pension for Life beginning in April 2019, benefit payments are spread over the lifetime of the Veteran, resulting in lower near-term cash payments. Expenditures are expected to increase through the rest of 2019-2020 as the Department moves through the transition phase and begins to stabilize the new operating environment. Additionally, spending on Operating expenditures (Vote 1) increased by approximately $12.8M, primarily attributed to investments in initiatives to improve services and programs to Veterans and their families, and reduce the backlog, particularly through the implementation of the new Pension for Life initiative. Spending on statutory authorities remained relatively stable with only a small increase of approximately $1.6M.

Figure 1 - First Quarter and Year-to-date Expenditures Compared to Budget

Comparison of Net Budgetary Authorities and Expenditures for the Quarter Ended June 30, 2018 and June 30, 2019 (in millions of dollars)

Fiscal Years	2018-2019	2019-2020
Net Budgetary Authorities	4,395	4,388
Expenditures for the Quarter ended June 30th	1,123	1,060
Year to date Expenditures	1,123	1,060

As a result of the Government’s expenditure management cycle, there are often fluctuations by quarter and between fiscal years when comparing budgets and expenditures. This is primarily a result of the quasi-statutory nature of the Department’s programs, which are demand-driven and based on need and entitlement. In other words, Veterans who meet the eligibility criteria for VAC’s programs are paid as they apply for benefits. As in previous fiscal years, current departmental forecasts are predicting higher program payment expenditures by the end of 2019-20 as compared to last fiscal year (i.e. 2018-19).

*Note – VAC received approval in June 2019 for increases to the program payment budget in the amount of $956.3M. This will not be reflected in the Department’s Quarterly Financial Report until Supply is received, as per the expenditure-basis of accounting. 

Statement of Departmental Budgetary Expenditures by Standard Object

When analyzed by Standard Object, expenditures in the first quarter are generally consistent in comparison with prior-year spending. The largest variances include:

• A decrease of $77M in Transfer Payments which, as noted above, relates primarily to the transition to the Pension for Life suite of programs and changes to the way payments are issued. As a result of offering monthly benefits through Pension for Life beginning in April 2019, benefit payments are spread over the lifetime of the Veteran, resulting in lower near term cash payments. As noted previously, this trend is expected to reverse for the remainder of fiscal year 2019-20.
• An increase of $7.4M in Personnel Services primarily attributed to continued efforts to reduce the backlog and improve the delivery of services and programs to Veterans and their families, particularly through the implementation of the new Pension for Life initiative.
• An increase of $3.1M in Utilities Materials and Supplies primarily attributed to an increase in requirements for health services for Veterans, such as prescription drugs.

3. Risks and Uncertainties

VAC is dedicated to enhancing the health and well-being of Veterans and their families and recognizes that its success in fulfilling this mandate is directly related to the effective management of risk. Sound risk management equips the Department to respond proactively to change and uncertainty by using risk-based information to support effective decision-making, resource allocation, and ultimately, better results for Canadians. Additionally, it can lead to effective service delivery, better project management, and an increase in value for money.

VAC operates in a dynamic and complex environment characterized by internal and external drivers of change. The Department employs integrated risk management tools to proactively and systematically recognize, understand, accommodate and capitalize on new challenges and opportunities, with a focus on results. In addition, the Department has effective internal control systems in place, proportionate to the risks being managed.

As such, the Department’s executive-level committees, the Assistant Deputy Minister level Senior Management Committee and the Director General level Corporate Policy and Planning Management Committee serve as forums where the Deputy Head ensures that Senior Department Managers are aware of their financial management responsibilities, have the tools to enable these responsibilities, and manage the financial performance within their areas of responsibilities. In addition, these committees recommend and prioritize the department’s investment opportunities, based on Integrated Business Plans (IBPs), to ensure their alignment with departmental and Government of Canada expected results. The IBPs also support the development of integrated program and corporate risk registers and enable resource capacity planning for the department.

Key risks currently being managed by the Department include:

1. Maintaining Core Services: To avoid the risk of not providing timely, high quality core services and benefits to Veterans and their families while simultaneously implementing several new initiatives and programs from multiple federal budgets, Veterans Affairs is monitoring and mitigating the risks through:
   1. Refining internal processes to improve efficiency;
   2. Increasing the use of automation;
   3. Recruiting, training, motivating and retaining employees; and
   4. Maintaining a reasonable case manager to client ratio.
2. Fulfilling Mandate Letter Commitments: To prevent the risk of not fully implementing remaining mandate commitments, given the volume and complexity of commitments made to Veterans, Veterans Affairs Canada is mitigating the risk through:
   1. Reporting progress internally and through canada.ca;
   2. Increasing the use of automation; and
   3. Recruiting, training, motivating and retaining employees.
3. Achieving and Demonstrating Results: To avert the risk of not fully meeting planned targets, given that responsibility for Veterans' well-being is shared with multiple jurisdictions, other government departments, and individual Veterans, Veterans Affairs Canada is mitigating the risks through:
   1. Working closely with partners to ensure efforts are well aligned; and
   2. Exploring additional opportunities for sound research and data to inform direction.

The Department monitors these risks through the Departmental Results Framework and internal performance reports. Tracking performance in these areas enables timely adjustments and ensure risks are being effectively mitigated.

Additionally, the Departmental Audit Committee provides an important advisory function as part of the Department’s governance structure for risk. It provides objective advice and recommendations to the Deputy Head regarding the sufficiency, quality and adequacy of the department's risk management process.

This integrated risk management process ultimately supports the Department in meeting its objectives. Further information on risks facing the Department and the steps taken to mitigate them can be found on VAC's website.

4. Significant Changes in Relation to Operations, Personnel and Programs

Changes at Senior Management Level

On April 18, Steven Harris was named Assistant Deputy Minister, Strategic Policy and Commemoration.

Mandate/Budget Commitments

Budget 2018

Pension For Life:

On February 5, 2018, the Department’s Service Delivery branch launched the Pension for Life (PFL) implementation project. The project rolled out new program benefits such as Income Replacement Benefit, Pain and Suffering Compensation and Additional Pain and Suffering Compensation.

VAC started accepting applications and paying new benefits in April 2019. The implementation phase of the project will close March 31, 2020. The total project team includes ten (10) self-managed teams with members from different areas of the Department. These teams reach out across the Department to gather the information and skills necessary to complete the work.  The project implementation team defined the core work to be completed in 2019-2020. This work includes cross-program features as well as features specific to financial, rehabilitation and disability benefits.

The human resources required to properly support the project was an important aspect of PFL. VAC applied innovative recruitment approaches to attract and retain the talent required. The Diminished Earnings Capacity (DEC), Income Replacement Benefit (IRB) and Financial Benefit Support Units (FBSU) are now operational across the country (Winnipeg, Manitoba; Kirkland Lake, Ontario; and Campbellton, New Brunswick).

Another important facet of PFL is the need to train employees.  Multiple delivery approaches are being used, including self-paced modules, video-conferencing and face-to-face training. To date, more than forty (40) e-learning modules have been created—with more in the development stage, over 150 WebEx sessions and nearly 50 face-to-face sessions have been held with employees and over 30 job aids and nearly a dozen instructional videos have also been created. Systems training and support will continue throughout the remainder of the project.

Budget 2019

This year’s budget makes additional investments to help Veterans and their families navigate the unique challenges they face transitioning to life after service. It also makes important contributions to honour the sacrifices of Veterans and their families and ensure their stories are known by generations to come.

To offer some highlights, Veterans Affairs will receive funding to:

• Support a number of initiatives to simplify the transition process for Veterans and their families;
• Expand access for the Education and Training Benefit to members of the Supplementary Reserve;
• Support research into the unique health needs of Veterans and their families by funding the ongoing operations of the Canadian Institute for Military and Veteran Health Research (CIMVHR);
• Develop an in-depth understanding of chronic pain among Veterans through the creation of a Centre of Excellence on Chronic Pain Research;
• Ensure Veterans’ families have the financial support they need through a new Veterans Survivors Fund;
• Honour those who lost their lives in the Second World War and all who have served during times of conflict with funding for the Juno Beach Centre in Normandy, France and the Highway of Heroes project, respectively; and
• Recognize the contribution of Métis veterans to the country’s Second World War efforts and commemorate the sacrifices and achievements of all Métis veterans.

Commemorative Activities:

In June 2019, the 75^th anniversary of D-Day and the Battle of Normandy was commemorated. The overseas program included participation in a number of events in the Normandy region and a June 6^th Government of Canada signature ceremony at Juno Beach in Courseulles-sur-Mer, France. The moving ceremony concluded with a wreath-laying on Juno Beach. A Government of Canada signature ceremony was also held on June 6, 2019 in Halifax, Nova Scotia at the Willow Park Armoury. The event in Halifax was the culmination of a rail journey across Canada throughout the spring and early summer with combat boots—symbolizing the thousands of Canadians who traded in their civilian shoes for combat boots and undertook similar journeys during the Second World War.

5. Approvals by Senior Officials

Original signed by:

II. Financial Statements

Statement of Authorities

* Includes only Authorities available for use and granted by Parliament at quarter-end.

* Includes only Authorities available for use and granted by Parliament at quarter-end. Includes $44M in Budget 2019 measures approved by Treasury Board

Departmental Budgetary Expenditures by Standard Object (unaudited)

* Includes only Authorities available for use and granted by Parliament at quarter-end.

* Includes only Authorities available for use and granted by Parliament at quarter-end. Includes $44M in Budget 2019 measures approved by Treasury Board